Schneiderman: “Today’s Settlement Is A Major
Victory In The Fight To Hold Those Who Caused The Financial
Crisis Accountable”

NEW YORK – Attorney General Eric T. Schneiderman today
joined the members of a state and federal working group he
co-chairs in announcing a $13 billion settlement with JPMorgan
Chase. The agreement – the largest settlement with a single
entity in American history – resolve federal and state civil
claims arising out of the packaging, marketing, sale and issuance
of residential mortgage-backed securities (RMBS) by JPMorgan,
Bear Stearns and Washington Mutual prior to January 1,
2009.

The settlement requires JPMorgan to pay $9 billion and
provide $4 billion in consumer relief, including mortgage
modifications for homeowners at risk of foreclosure. New York
State will receive more than $1 billion of the $13 billion
settlement, including $613 million in cash and approximately $400
million in consumer relief for struggling New Yorkers. Among
other uses, the cash portion will be directed to provide
additional legal services and housing counseling for those
affected by Superstorm Sandy. The settlement was negotiated
through the Residential Mortgage-Backed Securities Working Group,
a joint state and federal working group formed in 2012 to share
resources and continue investigating wrongdoing in the
mortgage-backed securities market prior to the financial crisis.
Attorney General Schneiderman co-chairs the RMBS working
group.

“Since my first day in office, I have insisted that there
must be accountability for the misconduct that led to the crash
of the housing market and the collapse of the American economy,”
said Attorney General Schneiderman, co-chair of the
RMBS working group. “This historic deal, which will
bring long-overdue relief to homeowners around the country and
across New York, is exactly what our working group was created to
do. We refused to allow systemic frauds that harmed so many New
York homeowners and investors to simply be forgotten, and as a
result we’ve won a major victory today in the fight to hold those
who caused the financial crisis accountable.”

The settlement resolves a lawsuit filed by Attorney General
Schneiderman in October 2012 against J.P. Morgan Securities LLC
(formerly known as Bear Stearns & Co. Inc.), JP Morgan Chase
Bank, N.A., and EMC Mortgage LLC (formerly known as EMC Mortgage
Corporation) alleging fraud under the Martin Act in the packaging
and sale of residential mortgage-backed securities by Bear
Stearns. As part of the global settlement, JPMorgan acknowledged
it made serious, material misrepresentations to the public –
including the investing public – about numerous RMBS
transactions.

The global settlement includes a Statement of Facts, in
which JPMorgan acknowledges that it regularly misrepresented to
RMBS investors that the mortgage loans in various securities
complied with underwriting guidelines. Contrary to those
representations, as the Statement of Facts explains, on a number
of different occasions, JPMorgan employees knew that the loans in
question did not comply with its own guidelines and were not
otherwise appropriate for securitization, but they allowed the
loans to be securitized – and those securities to be sold –
without disclosing this information to investors. This conduct,
along with similar conduct by other banks that bundled toxic
loans into securities and misled investors who purchased those
securities, contributed to the financial crisis.

Attorney General Schneiderman was elected in 2010 and took
office in 2011, when the five largest mortgage servicing banks,
all 50 state attorneys general, and the federal government were
on the verge of agreeing to a settlement that would have
immunized the banks – including JPMorgan – from liability for
virtually all misconduct related to the financial crisis.
Attorney General Schneiderman refused to agree to such sweeping
immunity for the banks. As a result, Attorney General
Schneiderman secured a settlement that preserved a wide range of
claims for further investigation and prosecution.

In his 2012 State of the Union address, President Obama
announced the formation of the RMBS Working Group. The
collaboration brought together the Department of Justice (DOJ),
other federal entities, and several state law enforcement
officials – led by Attorney General Schneiderman – to investigate
those responsible for misconduct contributing to the financial
crisis through the pooling and sale of residential
mortgage-backed securities.

Today’s settlement is a product of the RMBS Working
Group.

Michael P. Stephens, Acting Inspector General of
the Federal Housing Finance Agency, said, “JP
Morgan and the banks it bought, Bear Stearns and Washington
Mutual, sold hundreds of billions of dollars of defective
mortgages into the securities markets helping to precipitate the
financial crisis. Investors, including Fannie Mae and Freddie
Mac, suffered enormous losses by purchasing RMBS from JPMorgan,
Washington Mutual and Bear Stearns not knowing about those
defects. Today’s settlement is a significant, but by no means a
final step by FHFA-OIG, DOJ the NYAG, and our other law
enforcement partners to hold accountable those who committed acts
of fraud and deceit. We are proud to have worked on this case
with Attorney General Eric Schneiderman and his outstanding staff
in New York and we look forward to our continued work together,
as well as with the other federal and state agencies that have
contributed significantly to this case.”

New York State Comptroller Thomas P.
DiNapoli said, "With today’s historic settlement,
Attorney General Eric Schneiderman is delivering accountability
and real relief for New York homeowners at risk of
foreclosure."

Suffolk County Executive Steve
Bellone said, “I am grateful to Attorney General
Eric Schneiderman for securing a settlement with JPMorgan that
will provide welcome relief to thousands of Long Island
homeowners. Families that are currently at risk of foreclosure
will instead be able to modify their mortgages and keep their
homes as a result of today’s settlement.”

Erie County Executive Mark
Poloncarz said, “I commend Attorney General
Schneiderman for his continued pursuit of international lending
institutions that use predatory lending practices to target our
citizens. It is my hope that these recovered funds will be used
to rebuild our communities and help to repair the damage done by
this deceptive lending.”

Congressman Brian Higgins said, “The
reckless and irresponsible actions of some of our largest banks
helped cause the financial crisis. Their greed did great damage
to our state and national economy. I commend Attorney General
Schneiderman for his relentless pursuit to bring accountability
and restore trust in our financial system.”

Congressman Jerry Nadler said,
“Attorney General Eric Schneiderman's announcement of a $13
billion settlement today is a landmark moment in effort to hold
accountable those who engaged in fraud and/or malfeasance that
led to the financial crisis. I have been extremely impressed that
when others gave up or threw obstacles in his path, Attorney
General Schneiderman insisted that federal and state prosecutors
keep digging, and as a result, the people of New York will see
the largest settlement to date in this matter.”

Syracuse Mayor Stephanie Miner said,
“Attorney General Eric Schneiderman not only made sure that
JPMorgan was held accountable for its role in the financial
crisis. He made sure that today’s settlement will deliver real
relief to homeowners in Syracuse and other hard hit cities around
New York State.”

Christie Peale, Executive Director of the Center
for New York City Neighborhoods, said, "This is an
incredible victory for New York homeowners, tens of thousands of
whom have been struggling to negotiate their own settlements with
banks—many with little success. Attorney General Schneiderman's
willingness to stay in this fight and stand side by side with
homeowners throughout the state to secure the benefits of this
historic settlement demonstrates the kind of leadership we need
at all levels of government. We are grateful for his commitment
to delivering to New Yorkers the tools they need to restructure
their mortgages and rebuild their lives.

Kirsten E. Keefe, Senior Staff Attorney at the
Empire Justice Center, said, “Once again, Attorney
General Eric Schneiderman is at the helm, fighting for New York’s
working class and holding a big bank accountable for its illegal
behavior. Today’s settlement with Chase is historic and
will keep thousands of homeowners in their homes. It has been
patently unfair, and harmful to our housing recovery, that
lenders have continually refused to forgive debt even on homes
that lost their value as a direct result of the financial
collapse caused by the banks. The principal reduction afforded by
this settlement instills fairness in the system and will help
ensure thousands of homeowners keep their homes."

Josh Zinner, Co-Director of the New Economy
Project, said, "We thank Attorney General
Schneiderman for his efforts to hold the too-big-to-fail banks
accountable to communities. The big banks' central role in
fraudulently securitizing predatory mortgages fueled the
financial crisis – this settlement is an important
acknowledgement that these fraudulent practices caused great harm
to homeowners and communities, and not just investors."

Jennifer Ching, Director of Queens Legal
Services, said, “Today's historic settlement is
designed to provide real and direct relief to New York homeowners
who have been victimized by fraudulent practices that have
destabilized neighborhoods throughout our state. We thank
Attorney General Schneiderman for holding JPMC accountable and
look forward to working with his office to connect thousands of
homeowners – many of whom have struggled for years to obtain
sustainable mortgage modifications – with the resources created
by today's agreement.”

Under the settlement, JPMC will be required to:

Provide $2 billion in principal reductions to borrowers,
including first and second liens and forbearance;

Provide an additional $2 billion in financial relief for
borrowers and communities, including:

Refinancing at lower interest rates;

Donation of bank-owned properties or bank-controlled
distressed mortgages to nonprofits or land banks;
and

New mortgage loans to low-and moderate-income
families harmed by the financial crisis.

Compliance with the settlement will be overseen by an
independent monitor. It is expected that of the $4 billion in
consumer relief, approximately $400 million will flow as
creditable relief to New York homeowners.

The New York Attorney General’s Office investigation and
litigation was conducted under the supervision of Deputy Attorney
General Virginia Chavez Romano who, together with Chief of the
Investor Protection Bureau Chad Johnson, worked closely with the
New York Attorney General to achieve this historic
settlement.